European Communities (Amendment) Bill

moved Amendment No. 3:
Page 3, line 13, after ("Communities)"), insert ("but not Article 8 thereof").
The noble Lord said: I beg to move Amendment No. 3, which stands in my name and in those of my noble friends. It may be for the convenience of the Committee if we also discuss Amendment No. 4. I sat quietly, as I usually do, listening to the debates on the previous two amendments. I was to some degree amazed and indeed rather concerned at the ease—indeed, the alacrity—with which the Committee was prepared. in the face of advice not only from your Lordships' own Select Committee but from the Select Committee on Foreign Affairs of another place, to vote away some of our powers and some of our sovereignty. We heard from the noble Baroness, Lady Elles, that the European Assembly—shortly to be officially named "the Parliament"—wishes to get its hands on more power.

Indeed, it is my view that the European Assembly always has been, is at present and will continue in the future to be avid for power. There is only one way in which it can have more power and that is to filch it from somewhere else, and generally speaking it will filch it from your Lordships' House and the House of Commons. It will filch it from the British Parliament. As I say, I was surprised that we should agree to the first amendment with alacrity; that we should agree almost with acclaim to reduce some of our sovereign power. But there has always been this ratchet effect within the EC.

We know perfectly well that in 1972, during those long debates in which I took part in another place, we were given all sorts of assurances that the sovereignty of the British nation would not be affected in any way by our going into the EEC. We were assured that Parliament would lose none of its sovereignty. Yet we are now told by our own Parliament that we are to lose even more of our sovereignty than we lost when we entered the Community—although we were assured, and the electorate were assured, in the 1970s that we should not lose such sovereignty.

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The treaty which we are discussing today in conjunction with the Bill is yet another of those ratchets which takes away from this place and from another place power and gives that power to the institutions of the Treaty of Rome. During the discussion that we had on our previous amendments, the noble Baroness, Lady Young. in dealing, I think, with the contribution by her noble friend Lord Caldecote about the Prime Minister's remarks this morning, quoted her as saying that this Single European Act was essential for the progression and the well-being of the Community.

Now the Prime Minister has changed her mind. On 2nd July 1985, she said after the Milan Summit:
Positive improvements in the Community's decision-making could have been decided in Milan and did not require any treaty amendment. I saw nothing before us that would require an amendment to the treaty".
That was the Prime Minister's view in July 1985. But apparently that view was changed by some means or another; she changed her mind. I feel quite sure that she changed her mind very reluctantly indeed. That is another reason why I was surprised, and continue to be surprised, that this House and the other place are prepared to accede to the ratification of this treaty with such alacrity.

Having made those points, let me now come to the amendments which are before us, Amendments Nos. 3 and 4, and consider what they mean. Let us have a look at Article 8 of the Single European Act. It says:
Any European State may apply to become a member of the Community. It shall address its application to the Council, which shall act unanimously after consulting the Commission and after receiving the assent of the European Parliament which shall act by an absolute majority of its component members".
That is an entirely new power which is being given to the European Parliament. It is not an increase in its present power, if I am reading the Treaty of Rome aright; it is a new power. Article 237 states:
Any European State may apply to become a member of the Community. It shall address its application to the Council whose decision, after the opinion of the Commission has been obtained, shall be unanimous".
There is no mention there of the European Assembly. It goes on to say:
The conditions of admission and the adjustments to this Treaty necessitated thereby shall be the subject of an agreement between the Member States and the applicant State. This agreement shall be submitted for ratification by all the contracting States in accordance with their respective constitutional rules.
In other words, under those circumstances the application of a new member would have to be referred to this Parliament, and presumably the parliaments of all other member states, for ratification. There is no mention there of the European Assembly. So in fact we now have the European Assembly, shortly to be officially called a parliament, having to give its assent, where assent was not before required, before a new member can be admitted.

Your Lordships may say, "So what? That is merely another voice to be heard and another assent to be given". They may argue that after all it is a democratically elected assembly and why should it not give its consent? But I would remind your Lordships that all the parliaments, including this one, of the European Community are elected by democratic means and they are usually elected on the basis of perhaps a 70–80 per
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cent. poll, whereas the European Assembly, certainly in this country, is elected on something like a 30 per cent. poll.

Why in fact do we need the assent of this other assembly? The people have already given that power of decision, through election, to the national parliaments. But I suppose it would not matter so much if there was just another voice and that was all there was to it. In fact, here is a dangerous loss of sovereignty, because what the European Assembly, shortly to be called a parliament, can now do is to blackball the admission of any applicant to the European Community, so that they have a very real power for the first time. That is something entirely new, and although all the parliaments of all the 12 states may wish a new member to be added to their ranks, they may not do it. Some of us perhaps could not conceive that they would do it but, if they wish, they can overrule the democratically elected parliaments of all the 12 states. As I have said, that is a new power given to the European Assembly, and it is a power not taken away but a power which is certainly in some way acquired by the European Assembly over the national parliaments.

Something similar, although not quite the same, applies to Amendment No. 4, which refers to Article 9. That says that the second paragraph of Article 238 of the European Communities Treaty shall be replaced by the following provision:
These agreements shall be concluded by the Council acting unanimously and after receiving the assent of the European Parliament, which shall act by an absolute majority of its component members.
Article 238 refers to associate membership of the European Community and Article 238 refers only to consulting the assembly. In fact, for any country to be able to get associate membership, they will have to get the assent of the European Assembly. Indeed, there is no role here for our own Parliament or any other parliament of the 12 European states. There is no role for us at all. We do not have to ratify it; we are not consulted; and we do not have to give our consent or assent. But in future the assent of the European Assembly will be necessary not only for new members but also for associate members.

I submit to your Lordships that this is a very real derogation of our own sovereignty and an addition to the powers and sovereignty of the European Assembly, soon to be called a parliament. Those are the facts. It is no good trying to convince us, as happened in another place, (though not in this House), when attempts were being made to convince Members that words actually did not mean what they said. I prefer to believe that words do mean what they say, and when words mean what they say we should take them very seriously. We should not say, "Perhaps they mean that, or they might mean this". So far as I am concerned, they mean what they say and they mean that a certain amount of sovereignty has gone from this place, and additional power has been given to the European Parliament.

I hope I shall not be told that if we, as a Chamber, had the temerity to agree to these amendments we would in fact be wrecking the whole treaty, because
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that simply is not good enough. We have before us a Bill—and I think my noble and learned friend Lord Silkin of Dulwich explained this—and any Bill which is before us must be capable of amendment by this Chamber, as it is by another place, after full discussion. When we are told that if we in our wisdom decide that something is too dangerous and will derogate from the sovereignty of this Chamber, and that if we decide in those circumstances to pass an amendment which in fact alters the treaty arrangements we will be doing great damage, that we should not do it and that basically and morally we have no right to do it, that is not the way to run any assembly, whether it be this Parliament or the European Assembly. We must be allowed to make our decisions in accordance with our constitution and not under threat.

I sincerely hope that your Lordships will take those points seriously because I have a high regard for, and love of, our Parliament and our constitution. I want to see nothing happen which will take away the powers that we have and the manner in which we do our business. I believe that we have an example to set to the rest of the world and that we still have a role in the world as an independent state. I beg to move.

Apart from the perceived need to improve the decision-making machinery of the Community, the other strand in this Bill and throughout the negotiations which led up to the agreement on the Single European Act was the desire to give more power or influence to the European Parliament. This desire was felt very much more strongly by some of our partners in the Community than by ourselves: indeed, it was felt very much more strongly by some of them than is finally reflected in this Bill. But because of that—although not only because of that—something had to be done in this area to give more influence to the European Parliament because, as I say, of these very strong wishes of some of our partners in the Community and also for reasons of natural and historic logic.

What was the point of our ever introducing direct elections to the European Parliament, with all the effort, the dedication and expense which my noble friend Lady Elles was listing earlier this afternoon, if we were not at some stage to give the European Parliament a more general legislative function than it has today? I think that the powers that have been given to the European Parliament under this Bill are very intelligently calculated. It is not clear exactly how they will work out, but I think that they have been finely balanced between the interests of national parliaments and the need of the member states to move forward in progress with the European Community.

I think that the two particular powers on which the noble Lord, Lord Stoddart, was commenting so negatively in these amendments, and also the new powers of the European Parliament to give assent to new accessions and association agreements, are perfectly proper powers to be given to the European Parliament. They do not, as I see it, derogate—at least directly—from any sovereignty of national parliaments and I believe that these two amendments should be rejected on their merits.

I should like to support the noble Lord. Lord Stoddart, in one comment which he has made. Of course this House, while the country does not have a written constitution or an elected Upper Chamber, is the place which should discuss all matters which affect its constitution. I think we owe a debt to the noble Lord, Lord Bruce, and to his colleagues for putting down these amendments, which provide us with an opportunity to discuss what is, by any standards, an important constitutional step for the country and the Community. I would certainly not add my voice to those which are alleged to have been raised in calling for these amendments to be struck from the record. They provide an opportunity for us to see at first hand the shallow and shabby nature of the case which the noble Lord, Lord Stoddart, has just advanced.

The noble Lord has alleged that national parliaments would no longer have any powers if new states wished to become members or associates of the Community. The Council of Ministers would of course retain those powers which it has under the present treaty and, if the provisions are to be operated by unanimity, member states would be responsive to their national parliaments. Unless the noble Lord believes that in the future member states' representatives in the Council of Ministers will not be accountable to their national parliaments, of course national parliaments will continue to maintain very stringent control over their representatives—

Lord Bruce of Donington

I am grateful to the noble Lord for giving way. Will the noble Lord concede the point that many Ministers, allegedly representing their own parliaments, face their own parliaments with decisions that have already been made and do not seek in advance a mandate for the actions which they take? Does the noble Lord still say that the position of parliaments—and I am talking particularly about the United Kingdom—is fully safeguarded by the fact that we have a Minister? Ministers, as in the case of this particular Bill, did not notify Parliament in advance.

I shall not be tempted down all the highways and byways to which that intervention might lead me. I shall say to the noble Lord only that my experience of British Ministers representing governments of the party of which I am a member is that they consult very fully with their colleagues, and Members on their side of the House, before going into negotiations in the Council of Ministers, for the simple reason that they need to maintain a majority to defend the decisions they take in council when they return to the House. Perhaps under the administration of the noble Lord's party things did not proceed in that manner. However, in the Danish Volkting, for example, there was a Market Committee which governed the actions of Ministers of whatever party. All the Ministers of the present Government, as I understand it, are fully responsive to what their colleagues in the House of Commons and the Government ask them to do, in advance of their representations of the Government in the Council of Ministers.

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I really intervened to make a speech that touches on comments which might have been advanced more appropriately earlier, but as there were so many other speakers I thought I should wait until the Chamber was emptier. The purpose of the European Community is to serve those member states forming it. It is not an organisation designed to crush the individuality and the liberty of those citizens who form part of it. My constituents wish to see a European Community which is more responsive and which acts more quickly, rather than one acting more slowly and being more remote. These provisions in the Single European Act, taken together, form a parcel of modest measures which advance the cause of democratic control and make decision-making at the top easier to complete.

The noble Lord, Lord Stoddart, speaking in a revivalist mood about days gone by when he and his colleagues failed to convince the British people that the European Community was the ultimate destruction of the British parliamentary way of life, does not seem to have recognised that the European Community is moving slowly to new ways of making itself more accountable and accountable directly. Like him, I am sorry that the turn-out was not higher in the last European election and I hope he does his best to make sure that the next European Parliament can carry out these powers and make the Community work better and take decisions faster. We can then have a Community that is closer, rather than farther, from its people.

I am sorry that the noble Lord, Lord Stoddart, after sitting so quietly and patiently through the earlier debate, feels it necessary to indulge in scaremongering to the extent of saying that if the European Parliament is going to increase its ability to operate within the European Community it will be filching power from somebody else.

I feel that it is also necessary to refer to his suggestion about a change of mind by the Prime Minister. In fact, when the Prime Minister reported to another place on the Milan European Council of June 1985, she referred to our reluctance to envisage the far-reaching treaty changes which some were then canvassing, but both she and my right honourable and learned friend the Foreign Secretary made clear that we would consider any proposals for treaty amendment on their merits and, in particular, whether they would lead to early completion of the common market in goods and services. Both my right honourable friend the Prime Minister and my right honourable and learned friend the Foreign Secretary played a leading role in securing the entirely practical changes to the European Community Treaty which are incorporated in the Single European Act. That is why the Prime Minister was able to commend the agreement to Parliament and the country.

Turning to the specific amendments, on Amendment No. 3, which relates to Article 8 of the Single European Act, the present position is that the opinion of the European Parliament is already sought before the accession of a new member state to the Community. Under the new procedure in the Single European Act, accessions will require the assent of the European Parliament. This has already been stated.
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The consent of this Parliament and of all other national parliaments in the Community will still be required before new member states can join the Community. There is thus no change in the role which national parliaments at present have in approving new accessions. To some extent I am surprised that the noble Lord, Lord Stoddart, is worried that the European Parliament should be able to say "no" to future members. In view of his party's views I would think they would be happy to curtail any increase in growth. Obviously, and equally, if the European Parliament says "yes" to a new member state, then a national parliament can also blackball that state's membership.

Turning now to Amendment No. 4, which relates to Article 9 of the Single European Act, the present position is that the European Parliament is consulted on association agreements. The Single European Act gives the European Parliament an opportunity to play a constructive role in relation to new association agreements. Again, the role of this Parliament and that of other national parliaments will not be diminished. They will have the last word as they do now and it must be said that the European Parliament, in view of its role in dealing with associated countries, is in a very good position to play an important role in this respect. It is most unlikely that the European Parliament would wish to hold up association agreements, for that would damage the very relations with the Community's associates which the European Parliament is keen to sustain. For those reasons, I hope either that noble Lords will be prepared to withdraw their amendments or that the Committee will reject them.

There are one or two points to which I should like to reply. First, the noble Lord, Lord Reay, referred to direct elections and his view is that if you directly elect an assembly then you should give them power. That is exactly the view which I expressed in 1967, 1968 and 1977 in another place when we discussed this matter. That is precisely what I predicted, and indeed what many other illustrious Members of that place predicted—that there would be additional powers demanded and given to a directly elected parliament.

That is why I voted against it. I resigned from the Government to vote against it because I did not believe what my own side were telling me, that direct elections did not mean any additional powers. If the noble Lord troubles to look at the reports of those debates, he will see that assurances were given—indeed, they were given by Michael Foot, who apologised for them during the debates on the Single European Act—that a directly elected parliament did not mean additional powers; and the House of Commons, and presumably this Chamber, took him at his word. But now, as we predicted, they are demanding and being given new powers.

As time goes on—and the Committee has the word of the noble Baroness, Lady Elles, on this—they will want more power. That is the nature of the beast. That is the nature of all assemblies and parliaments, except apparently this one. We want to give it away. But there is no doubt, as the noble Baroness, Lady Elles, has told
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us, that the European Parliament will demand more power. They can get that only from one place, which is the national parliaments of the member states.

Will the noble Lord allow me to intervene? Has he considered at all the problem of the democratic deficit, where certain powers were given to the Community 13 years ago and there was no democratic control at all of those powers? Would he consider that what the European Parliament are looking for at the moment is certainly not to take powers from national parliaments, but to exert the power with which they should be entrusted and which at the moment is not controlled by any democratic forum at all? It is an aspect of the argument on which the noble Lord has not touched.

I understand precisely what the noble Baroness is getting at. She believes that within the Community the European Assembly or Parliament—call it what you will—should have the power of democratic control. I understand that argument perfectly, but it is an argument which I have not accepted in the past and which I do not accept now. I believe that the proper democratic control of Community institutions should be through the national parliaments and I have always taken the view that Ministers should act in council only with the consent of the national parliaments.

There is a big difference between us. There is no doubt about that. The noble Baroness holds her own views, which I respect, but those are my views. However, I understand the point she is making and, indeed, I am praying her in aid of my own case that inevitably, if one assembly obtains more power which has previously been exercised by another assembly, that other assembly is bound to lose some of its power and therefore some of its sovereignty.

I can intervene only once on this point, and it is a central point. The noble Lord is not addressing himself to the intervention made by my noble friend Lady Elles. The noble Lord discounts the possibility that those aspects of democratic control, which were inevitably removed from the purview of national parliaments at the time of the formation of the Community, or the adhesion of new members, have therefore gone into orbit and are now to some extent outside the total control of national parliaments. If that is to be the case, is it not better that the democratic deficit be remedied by the European Parliament assuming those aspects of parliamentary control which have already been lost by national parliaments and would, if not taken up by the European Parliament, be permanently lost to the people of the Community? Will he address himself to that point?

I understand exactly what the noble Lord is saying, and I appreciate that certain powers have gone into orbit. His choice is to bring them back down to earth in the European Parliament. I happen to think that the British Parliament, and perhaps other parliaments of the European Community, have lost too much of their
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power and I should like to bring them back down to this Parliament. That is the difference between us. It will be a continuing difference, I have no doubt, but I assure the noble Lord that I understand his point of view. I understand what he is saying and, as a matter of fact, I agree with him that too much power has been lost to secret meetings in bureaucracies and what have you. But if there is to be power of democratic control, I believe it should return here and not be shunted aside to the European Assembly.

I was just going to mention the noble Lord because I was so pleased to have his qualified support. I think it had to be qualified, because he was agreeing with me on the one hand and disagreeing with me on the other hand. Nevertheless I was glad to have a little support from him on the central point I made—that this House would still have the power to discuss amendments and also to agree or disagree those amendments.

The noble Baroness, Lady Hooper, accused me of scaremongering. I do not think she can make that charge stick, because what I did was to point out the facts which she later confirmed. It is not scaremongering to tell the Committee what will happen under the Single European Act. Some people may be in support, as has been shown tonight; others may be against. But it is not scaremongering to tell people the facts of what we are about, and there is no doubt that what we are about is giving the European Assembly additional powers—powers which they have not enjoyed but in future will enjoy.

Will the noble Lord give way very briefly? I did not suggest that he was scaremongering in what he was saying in relation to the amendment. I was referring to his use of the expression "filching power" from somebody else, which suggests to me at any rate a rather furtive way of taking power and which, in view of the discussion today, cannot be held against us.

If the noble Baroness is worried only about the word "filching", I do not think we need worry too much. The fact is that we have had a good discussion today, and I welcome it. I am glad that we have had this discussion. though I have to say that earlier on, when I listened to some of the remarks made during the speech of the noble and learned Lord, Lord Denning, and my noble friend Lord Bruce of Donington, I wondered whether the discussion was being wholly welcomed on all sides of the Committee. I welcomed, too, the remarks made by the noble Baroness, Lady Young. We have had a good discussion and I am glad about that.

With regard to the words of Mrs. Thatcher, I have to say to the noble Baroness that I read the words in col. 327 of the House of Commons Hansard of 23rd April. This is what the Prime Minister told the House of Commons:
positive improvements in the Community's decision making could have been decided in Milan"—
at the conference to which she had just been and about which she was reporting to the House of Commons—
and did not require any treaty amendment … I saw nothing before us that would require an amendment to the treaty".
That is what the Prime Minister said when she came
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back from Milan. She believed that she could have tied it all up in Milan. But unfortunately she has been overruled by others, I fear, in the Community, and she has had to consent to doing something that she plainly did not want to do.

However, we have had a good discussion. I should like to consider what has been said during the debate. I hold to the view that I put forward at the beginning of the debate but perhaps at this time of night it would be better if we did not press the amendment to a vote. But I say to the Government that we consider the matter to be so serious and important that we may very well want to return to it at Report stage. I beg leave to withdraw the amendment.

moved Amendment No. 5:
Page 3, line 13, after ("Communities)"), insert ("but not Article 10 thereof").
The noble Lord said: I am glad that in the cool serenity of the evening we have arrived at a stage when there is no longer an almost Pavlovian reaction to anything which might be remotely construed as being critical of the EC. I am most grateful to my noble and learned friend Lord Silkin of Dulwich, and indeed to the noble Baroness opposite, for having enabled these discussions to be conducted in an atmosphere of slightly less hysteria than was conveyed to the Committee earlier, mainly from a sedentary position or from positions which have long since been vacated once the initial job had been done.

This amendment refers to Article 145 at page 293 of the treaty, which reads as follows:
To ensure that the objectives set out in this treaty are attained. the Council shall, in accordance with the provisions of this treaty, ensure co-ordination of the general economic policies of the member states and have power to take decisions.".
This is a most important responsibility delegated to the Council or made the responsibility of the Council under the terms of the treaty. It deals specifically with general economic policies.

The amendment proposes that it shall be supplemented by the following words comprised in Article 10 of the Single European Act. I propose to read them, because I wish the public to know what these delegated powers are going to be and I also want it put into the record for reference at a later stage. The words are:
Confer on the Commission in the Acts which the Council adopts powers for the implementation of the rules which the Council lays down. The Council may impose certain requirements in respect of the exercise of these powers. The Council may also reserve the right in specific cases to exercise directly implementing powers itself. The procedures referred to above must be constant with principles and rules to be laid down in advance by the Council acting unanimously on the proposal from the Commission and after obtaining the opinion of the European Parliament".
This is perhaps the first time when powers to determine broad general economic policy have been delegated specifically in this way. We are entitled to ask the Government just how these powers are to be exercised and just what kind of powers they have in mind. I have seen a proposal in a document 5433/86
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addressed by the Commission to the Council that gives some indication. The Commission says in the letter of transmittal, COM(86) 35 final:
Firstly, it is essential that the Council should amend its rules of procedure as soon as possible, along the lines which the Presidency has already proposed to the European Council in Milan, so that the Council can henceforth put matters to the vote on the initiative of its president or at the request of a majority of its members or of the Commission".
I should like to ask whether Her Majesty's Government endorse the request made by the Commission to the Council.

If one refers to the proposal for a Council regulation dated 3rd March which accompanied that letter of transmittal, one there finds—and these matters have been referred to already by your Lordships' Select Committee—that Article 3 sets out the structure and powers of the various advisory, management or regulatory committees which are to be used generally in the economic process to which the Government are committed, to which the EC is committed and to which I shall refer in more detail when we come to discuss the development of the internal market.

Sufficient for it to be known—and it should be realised now—that under the powers granted to the Commission in this part of the Bill the Commission proposes to act in conjunction with an advisory committee. It does not propose to act in conjunction with either a management or a regulatory committee, because both the management and the regulatory committees are subject to the normal voting procedures, whereas the advisory committee does not require any vote to be taken at all. All that is required is under the proposed regulation in Article 1 on page 5 of the text, which says:
No vote shall be taken. However, any member of the committee may demand that his views be set down in the minutes".
That means that in so far as the internal market is concerned and under powers conferred on the Commission by this section the noble Lord, Lord Cockfield, and his colleagues in the Commission may act, not in a way that is controlled by any management committee or regulatory committee, but merely through an advisory committee to which they need pay no particular attention.

We have to decide whether additional powers ought to be given to the Commission. This raises two issues: first, the competence of the Commission based upon its past actions and, secondly, the competence of any Council of Ministers from time to time in existence to give any effective direction. I say this in the full knowledge that if I make any criticism of what the Commission has done in the past I am bound to raise immediate paroxysms of rage from those who think that the Commission, by reason of being the Commission of the EC, is composed entirely of archangels who are immune from normal human frailties afflicting even Members of this House.

How effective has the Commission been? It is composed of individuals appointed by member governments for, presumably, a period of time. They are subject to the final nuclear bomb solution in that the entire Commission can be sacked by the Assembly—but that is such a nuclear solution that nobody ever contemplates it. But how competent is
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the Commission? I referred in entirely truthful and sincere terms to the former Commissioner Tugendhat who was one of the most competent commissioners there have been. I could not remember the name of the other commissioner at that time but I now recall that it was Herr Gundelach, the Danish Commissioner for Agriculture. He was the first Commissioner for Agriculture never to duck a question put to him. He would always try to answer Members of the European Parliament honestly rather than evade their questions in the manner of his predecessor and, I regret to say, some of his successors.

Apart from that, how competent have the commissioners been? From time to time, and this has gone on for 11 years, we are told that the common agricultural policy is to be reformed. Year after year, when we have its massive expenditure and massive waste on export rebates, on stock deterioration, storage of surpluses, and so on, we are told again and again that the common agricultural policy—which, among other things, is costing the British taxpayer £1,000 million a year—is to be reformed. What steps has the Commission taken to produce constructive proposals?—because that is the onus that can be laid upon it by the Council. There has been nothing to stop the Commission, ever since 1975, when I was there, from producing comprehensive proposals for reform. That is not competence.

It may be that the Tower at Berlimont produces that easy way of going about matters. I must say that when I have been there it has always appeared to be very leisurely. I say this not in reproach to the noble Viscount the Leader of the House, who always fights assiduously for the interests of Members in this House and, indeed, for the interests of those in another place. Members of the Commission are paid salaries several multiples of those paid to ordinary Members of Parliament and, indeed, some Cabinet Ministers whose personal fortunes I would wish to see increased to the same levels that apply for some commissioners. When they retire, and after taking into account all expense allowances, they probably net a quarter of a million by the time their four-year tenure of office is over. But why is there anything in the Commission's record, as commissioners, that entitles them to have increased powers?

I refer to another aspect of that matter upon which the Committee may be able to make some judgment. I have before me the official journal of the European Community, C.326, dated 16th December 1985. It is the annual report of the Court of Auditors for the financial year 1984. Among other things, it reports on the accounts of the Commission. I can tell Committee Members—those who are in public companies or even private companies in the United Kingdom—that if an auditor had reported on their companies in terms even remotely resembling the comments of the Court of Auditors on the accounts of the Commission and the way it spends money, the instances of fraud, and so on, their companies would, if they were public companies, be deleted from the Stock Exchange list. Indeed, there would be a severe danger that under existing company legislation some directors would be indicted for offences against the Companies Acts.

The report of the Court of Auditors for that year, 1984, is very much on those lines. The noble Lord,
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Lord O'Hagan, and the noble Baroness, Lady Elles, well know that the annual reports of the Court of Auditors on the accounts of the Commission always contain large-scale criticisms which, in the main, the Commission declines to do anything about. Indeed, the Commission believes itself to be in a position where it can ignore the Court of Auditors.

There are plenty of instances, but I shall give only one, which should be sufficient. The case is that of a wine distillation, a fraud in France which cost in British money, at the exchange rate when I made this note—it may have changed slightly since—some £57 million. The Court of Auditors complained about it and the Commission simply brushed it aside. Even while I was in the Budget Committee, under the Budget Control Committee in the European Parliament, the amount of contempt with which the Commission as a whole treated the observations of the Court of Auditors was amazing. As the noble Baroness well knows, the Court of Auditors was instituted at the instance of the noble Lord, Lord Wilson of Rievaulx, when he was Prime Minister. I should have expected any responsible commission to take very careful note of the report of the Court of Auditors and take immediate remedial action.

I tell the Committee that, in my considered view, any commission that cannot instantly take action without demur, and with full resolution, on the report of a properly appointed, recognised and qualified Court of Auditors does not deserve the trust either of the Community as a whole or of the United Kingdom. There is a further reason why we should query the giving of additional powers to the Commission. I referred to it on Second Reading, but, if I may say so without offence, perhaps the noble Baroness was not briefed in detail on those matters.

There is of course a case. It is that which the Commission has apparently been able to bring against the United Kingdom Government, which will be heard shortly, requiring the United Kingdom Government, in accordance with the sixth VAT directive, to impose 15 per cent. VAT on new building. Apparently it has the power to do that. Is it going to be given more powers? We do not know, of course, what will happen to the case. What will be the Government's answer if the European Court of Justice, with its method of operation which the noble and learned Lord, Lord Denning, described earlier on, and of which I endeavoured to give a brief description, after its proceeding decides to order the United Kingdom Government to impose a 15 per cent. VAT charge on all new building? What will the right honourable Lady the Member for Finchley tell the United Kingdom if, suddenly, 15 per cent. is going to be put on new house prices as a result of the successful action by the European Commission?

Can it not be said—I put it no higher than this, and I ask noble Lords please not to get me wrong—that we really ought to take a hard look at all the powers the Commission exercises at the present time and which it is entitled to exercise under the terms of the treaty? We should have a review of how well it has exercised those powers. It is no good asking parliamentary questions at Strasbourg. I have read the replies to the questions that arise. If they do not want to answer questions, they do not bother. They evade. Is it not time that, before
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considering granting any more powers, we had a review of how those powers have been exercised?

Am I being wholly unreasonable in asking that there should be a review? Ye gods, what are Members of Parliament and noble Lords who take an active part in this Chamber there for? Are they there simply to simper, to follow any particular mood, to go along with the mob, to have singsongs from sedentary positions against anything they disapprove; or are they required, on behalf of the citizens of the United Kingdom, to exercise their critical faculties and to examine these matters carefully and objectively and to reach a balanced judgment? That is all I would propose prior to our granting these new powers.

There is also the question of the competence of the Council of Ministers. I should like to remind the Committee that, by and large, the staff of the Commission at the Parliament in Brussels tend to be there permanently. The heads change from time to time. The noble Lord, Lord Cockfield, was removed somewhat precipitately from office after a series of extremely inaccurate predictions about what would happen as a result of the increase in the money supply. That is neither here nor there, but these people tend to be permanent and in the junior and semi-senior staffs they tend to continue on. Therefore they begin to accumulate the power of knowledge and the power of continuity.

It is not so with the Council of Ministers. The Council of Ministers changes. For example, in so far as concerns the United Kingdom component it changes every time that there is a government reshuffle and, by Jove, one knows that although the lady is not for turning we have had a very considerable number of changes over the past two or three years. That means that there is no continuity. We know perfectly well that every member of the Council of Ministers, however much he may be assisted by COREPER and the permanent representatives in representing the United Kingdom wherever the Council meets, still has his own departmental responsibilities to deal with at home. He still has a full-time job. Any Cabinet Minister who reads the papers in his boxes—as I am quite sure does the noble Viscount, the Leader of the House, and indeed the noble Baroness, Lady Young—knows perfectly well that it is a pretty full-time job. We all know quite well—do we not?—save those of us who have a Pavlovian reaction when matters of this kind are pointed out, how much our own members of the Council of Ministers rely on their civil servants. Very often they do not read their papers. In fact, I should like to draw the attention of the Committee to some rather telling phrases in the report of the Select Committee on the European Communities, 1984–85, printed on the 23rd July last year, where at paragraph 75 there is the following gem, which should be engraved on our souls. The Select Committee says:
So far as meetings of the Council itself are concerned, the Select Committee accept the description given by one of their number: too many people are met in a huge disorderly gathering; most people come with prepared speeches and do not even listen to what their colleagues say. They make no pretence; they do not even have their headphones on".
So much for the Members of the Council of Ministers.

So here we have two weaknesses. First of all there are weaknesses in the Council of Ministers. In many
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cases Ministers probably read their briefs in the aeroplane when flying over to a meeting. They are very much in the hands of their civil servants and are very overworked in their own departments. Then we have a second series of people in the Commission itself whose record in my view still merits very careful examination before any further powers are given to them.

I urge the Committee to give consideration to these matters. If it is found, after a review of their activities, that these people fully merit the new powers that will be given to them, and if it is found that the members of the Council are fully competent to make up their minds about the directions to give them, then of course the Committee will resist this amendment. But if the Committee is open to even the faintest scintilla of doubt in the matter pending further investigation I sincerely trust that it may be moved to support this amendment. I beg to move.

This amendment relates to a part of the Single European Act which has already been the subject of a report from the Select Committee on the European Communities of your Lordships' House. As the Committee's report pointed out, Article 10 of the Single European Act, which this amendment would negate, is in fact designed to make the functioning of the institutions of the Community more effective. The House of Lords Committee went on to acknowledge:
the general principle that powers to implement the legislation of the Community should be conferred more often on the Commission. The Community needs to take decisions more swiftly".
The Committee also went on to note that:
the procedures for the exercise of delegated powers by the Commission should include adequate safeguards".
The Government agree with this approach.

What is at issue is a necessary step toward the more effective implementation of decisions taken by the Council of Ministers. The present situation is that the Council, in taking decisions, stipulates how those decisions are to be carried out. Inevitably, much of the responsibility for the implementation has to be placed on the Commission, guided by committees representing the member states.

I will not be drawn far down the path of the questions asked by the noble Lord, Lord Bruce of Donington. I think that everyone present in Committee tonight is interested in this matter, but those of the Committee who heard the noble and learned Lord, Lord Templeman, speak on Second Reading and who have done as I have and reread what he had to say, cannot fail to be impressed by his wisdom and his description of his experiences and that of the committee with its dealings with the Commission.

The noble Lord, Lord Bruce, raised two specific points which I shall answer. He referred to the efficiency of the Commission and he asked what steps it had taken to reform the common agricultural policy. I would only refer him and the Committee to the Select Committee of this place on the European Communities which in its report on European union said:
It is significant that the areas in which the Commission works best are those in which its freedom of action is greatest".312
The committee went on to say:
The extravagances of the CAP are almost entirely due not to the Commission, which has made many proposals for reform, but to the persistent failure or refusal of the Council of Ministers to take hard decisions".
To return to my argument, the exact form in which the implementing powers are exercised has hitherto had to be decided case by case for each Community measure. The result is that some 16 different procedures have grown up over the years and as a result a great deal of time is spent in deciding which procedure to use for which particular circumstance. The aim behind Article 10 of the Single European Act is to streamline the number of different implementing arrangements so that there is a clearly defined and limited number from which the Commission and Council can choose.

There is no question of the Commission usurping the Council's powers to take decisions on Community legislation. The Council will continue to take those decisions as it does now. It will be for the Council to decide whether to confer implementing powers on the Commission. If the Council decides not to do so, it will be free to reserve such powers to itself.

What is new is that where the Council decides to delegate powers to the Commission it will do so according to a previously agreed range of procedures. What those procedures should be is now under discussion by member states and the Commission. Any new procedures can only be agreed by unanimity.

As the noble and learned Lord, Lord Templeman, said on Second Reading, this means:
that Her Majesty's Government are in a position to insist on such safeguards as they consider necessary".
The noble and learned Lord also said:
The reason that the safeguards are not written into the Act is that that is not the right place to write them in. The safeguards must be written into the regulation".—[Official Report, 31/7/86; col. 1024.]
It is the content of that regulation that Her Majesty's Government are now discussing with other member states. Those discussions cover the type of safeguards which were recommended by the committee in its report.

In short, the Single European Act makes provision for more implementation of what the Council agrees, but it is the Council which will decide, by unanimity, what form that streamlined implementing procedure will take. When it has done that, it will still be for the Council to decide, case by case, whether to delegate implementing powers. So, our position will be fully safeguarded.

I have set out the position, I hope, as clearly as I can. I hope that the Committee will consider what I have said against what has been said by the Select Committee of this place, and in particular what the noble and learned Lord, Lord Templeman, said on Second Reading. I hope that with those assurances the noble Lord, Lord Bruce of Donington, will withdraw his amendment.

I share the great concern that there is about Article 10. I do not follow what my noble friend the Minister has said. The Select Committee on the delegation of powers is only half way through its consideration. In its report it said that it was a difficult
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problem because it is a tradition of democracy that we do not have the delegation of powers from the legislative body to the executive unless there is reference to a legislative body.

The Select Committee is half way through its investigation. It reported that it had not yet received all the evidence on certain aspects, adding that it would report in the autumn. It is now the autumn, but we have not yet received the report. I wonder whether there is any parliamentary precedent for a major constitutional change being discussed in Parliament before a Select Committee examining that constitutional proposal has made its report. In my 50 years in Parliament, I have not known that to happen before.

My noble friend the Minister said that the noble and learned Lord, Lord Templeman, had made some remarks on Second Reading. The noble and learned Lord, as chairman of the committee, made clear that there would be a further report for the House to consider in the autumn. By the time the report comes out, this Bill, whether it is right or wrong, will be law without the House having considered the report. I believe this to be an unusual procedure. I believe it to be an improper procedure. I hope very much that the Government will give thought to this. The country will not like constitutional change that affects parliamentary sovereignty being decided in this unusual manner.

I hope that I can reassure my noble friend Lord Tranmire on the points that he has raised. I refer to two conclusions of your Lordships' Select Committee report on the Delegation of Powers to the Commission. Paragraph 59 reads:
As a general principle, powers to implement in detail the broad rules laid down by the Council should be delegated to the Commission"—
that is what is proposed here—
but there must be adequate safeguards".
Yes. I have made plain that those safeguards are not ones that can properly be written into the European Act. Those are the ones that must be written into a regulation that is currently a matter of discussion between the member states. Paragraph 60 says:
Safeguards are needed to protect the interests of persons or bodies directly affected by Commission proposals and major national interests and, in the tradition of democracy, to ensure that legislative acts are not delegated to the executive without reference to a legislative body responsible to the electorate".
These are exactly the kind of points now being looked at. I hope that I have explained them fully. As the noble and learned Lord, Lord Templeman, explained, the report relates primarily to the regulation now before the Council, not to the Single European Act. I hope that with these assurances, my noble friend will see that we are fully cognisant of this matter, but that it is in the interests of the more efficient working of the institutions of the community.

Does my noble friend not agree that this is an interim report? An interim report is followed by a final report. All her quotations are, to that extent, limited until the final report occurs. It is no good
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merely quoting paragraph 60 of the document until we have the final report.

I do not want—indeed, I would not be allowed—to anticipate any discussion on my Amendment No. 55 which I still hope may be reached at some time. However, may I assure the noble Lord, Lord Tranmire, that what we are discussing is precisely the reason for the amendment. The amendment accepts that the Bill has become law but defers the commencement date until the Select Committee has finished its task and this House and another place are in a position to give their attention to the recommendations of the Select Committee, the European Parliament and other interested authorities in order to see that the regulation referred to by the noble Baroness is what we would like it to be.

I hope that the noble Baroness may feel constrained to answer in greater detail the points that have been made by the noble Lord, Lord Tranmire. It is quite clear from the reading of the report of the Select Committee that the final report—although it deals to some extent with the adequacy of the scrutiny proceedings and the pre-information requirements—does not exclude further reference to the Single European Act. I should have thought that it would have been best to wait for the Select Committee to have made its final report.

I was somewhat surprised on reading the latest weekly agenda that I can find (although I agree that was dated 1st August, No. 29, the only one available apparently in the Printed Paper Office) to discover that there are no meetings scheduled. I may be incorrect in this; there may be more up-to-date information. That is another example of all the documentation not being available. This is the latest list I have been able to obtain. If, therefore, the noble Baroness can give us some information as to when the appropriate subcommittee of the Select Committee is to meet to discuss this matter, it would give the Committee some guidance as to how long they might have to wait. My noble friend tells me that they will meet next week. His information is conveyed presumably by extra sensory perception, because it is certainly not in the official document. However, I immediately accept what he says.

Apart from a desire to deal with this matter—because it has to be got through somehow—I cannot see why the Government cannot wait for a far more detailed review of the Commission's activities and their effectiveness. I should have thought that this would have been easy to accomplish and at the same time to arrive at a more accurate assessment of the abilities of the Council, acting as a body in conjunction with COREPER and so on, to be able to issue effective directives.

I am very sorry that the noble Baroness cannot accept this amendment. I am afraid that on this occasion I must press it to a Division.

moved Amendment No. 8:
Page 3, line 13, after ("Communities)"), insert ("but not Article 13 thereof").
The noble Lord said: I beg to move Amendment No. 8 standing in my name and at the same time I should like to speak to Amendment No. 9. We now pass to perhaps what are the most important economic amendments which the Committee may have to consider, because they add new articles immediately following the existing Article 8 in the Treaty of Rome. The Committee will recall that at page 181 the Treaty of Rome states:
The Common Market shall be progressively established during a transitional period of 12 years.This transitional period shall he divided into three stages of four years each: the length of each stage may be altered in accordance with the provisions set out below",
and so on. I shall not weary the Committee by giving a complete recitation of Article 8. Nevertheless under the Single European Act some new articles are proposed.

Comprehensive though they may be, the provisions of the treaty at Article 8 are evidently not considered sufficiently definitive for the Community to be able to continue satisfactorily. Therefore, in Article 13 of the Single European Act it is proposed that the following articles should be added to the existing provisions of the treaty. There is Article 8A, which states:
The Community shall adopt measures with the aim of progressively establishing the internal market over a period expiring on 31 December 1992, in accordance with the provisions of this Article and of Articles 8B, 8C, 28, 57(2), 59, 70(1), 84, 99, 100A and 100B and without prejudice to the other provisions of this Treaty".
It goes on to say:
The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty".
In Article 14, which follows, it is proposed that Article 8B be added:
The Commission shall report to the Council before 31 December 1988 and again before 31 December 1990 on the progress being made towards achieving the internal market within the time limit fixed in Article 8A".
The second paragraph reads:
The Council, acting by a qualified majority on a proposal from the Commission, shall determine the guidelines and conditions necessary to ensure balanced progress in all the sectors concerned".
Then Article 8C reads:
When drawing up its proposals with a view to achieving the objectives set out in Article 8A, the Commission shall take into account the extent of the effort that certain economies showing differences in development will have to sustain during the period of establishment of the internal market and it may propose appropriate provisions".
The final paragraph of Article 8C is,
If these provisions take the form of derogations, they must be of a temporary nature and must cause the least possible disturbance to the functioning of the common market.".
The essence of these proposals is a formal enunciation within treaty terms of policies which seek to ensure that the maximum freedom takes place in the exploitation of the earth's surface and of its products; that the utmost freedom in the operation of the market, the operation of wealth, the movement of capital and the movement of people is ensured. In
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short, it is a complete reversion on official lines and given official blessing within a treaty to those disastrous economic policies that were followed out in the United Kingdom before World War II, which in part contributed to its outbreak and which in any event, with the weakest to the wall and the devil takes the hindmost—I am sorry that the noble Lord is so mirthful about it. It was serious for the people who were living at the time.

I hope the noble Lord will forgive me, but I have just come back from dinner. Some of us find the speeches of the noble Lord of great interest, but they are also of great length and have come to be described as Margaret Thatcher's secret weapon.

Lord Bruce of Donington

I accept the noble Earl's most courteous rebuke. It is my experience that when people begin to hear uncomfortable truths they seek always to denounce them by complaining of their length, but very rarely of their accuracy.

Will the noble Lord allow me to intervene again? I rather agree with much of what the noble Lord says, but if he could say it in five instead of in 35 minutes he would get more support.

Lord Bruce of Donington

I am very grateful to the noble Earl for giving an indication of sympathy in principle. If his sympathies were that strong he would not complain of the extra explanatory effort I have to make to reach people who are probably of less intellectual attainment than his own.

I consider that to be an insulting remark and I hope the noble Lord, Lord Bruce, will withdraw it.

Lord Bruce of Donington

I can assure the noble Baroness that my remark made no reference to her whatsoever. If the cap fits it can always be worn, but it was intended for a far wider audience of people who otherwise might not be able to understand the contents of what we are debating here, including the wisdom that falls from the lips of the noble Baroness from time to time.

There is the enshrining in a treaty of the apparent success of the policy of completely free movement of capital, persons and everything else throughout the Community. In more sober moments Ministers have thought otherwise, because when they were considering this matter in the Dooge Committee (which they were some little time back) there was complaint, from which Mr. Rifkind did not dissent, that one of the reasons why they wanted to reorganise and put a bit of zest into the Community was this quote from the Dooge Report:
Furthermore, after ten years of crisis, Europe, unlike Japan and the United States, has not achieved a growth rate sufficient to reduce the disturbing figure of almost 14 million unemployed".319
So much for the success of the free policies that have been adopted throughout Europe and which now it is sought to enshrine in treaties in order to give them an intellectual validity that they do not possess. Even the Select Committee of your Lordships' House in reporting on European union, and again in its reports on the effects of harmonisation of taxes and so on, refers to the manifest benefits of a large European market. Where are they manifest?—when the Dooge Report itself complained that they have not been able to do much anyway. Why, therefore, is it that there is this instinctive reaction that any large-scale market must inevitably produce prosperity and economic success? A lot of balderdash! In fact, it produces very large incomes for a small number of people.

Balderdash! It produces large profits for a very small number of companies, although 200 of the most profitable companies in Europe happen to be British. It also produces an underutilisation of resources; it produces large-scale unemployment and it produces all the evils from which not only we ourselves but other countries in Europe have suffered and are still suffering at the present time; so much so that it has given us a justification for taking another look at European organisation.

Do we always have to assume that large-scale economic activity carried on on a free enterprise principle over a large area is bound to give success? It certainly is not. All history proves that it is not. The European Community and some of its economic advisers may complain of the effects of the world depression upon it, but it was precisely the founding of the European Economic Community, the gathering together of a large number of nations, to create a market on a European scale that was supposed to be exactly the insurance against the economic depression of which people, particularly the Government, speak as though it were some kind of heaven-awarded deluge outside the control of man, that it was some kind of supernatural visitation; whereas, of course, it arises precisely because of the daftness of the whole policy of free enterprise, the whole daftness of the policy of the unrestricted movement of capital, persons and all the rest of it, which this seeks to enshrine.

The achievement of the internal market in Europe surely should be based upon a much sounder basis. If there is going to be this freedom and there is going to be this harmonisation to which they refer, do not Her Majesty's Government realise that the economy of the United Kingdom and the economy of Germany and all the rest of the individual countries have special characteristics all of their own? They are not equal; they do not bear equal burdens; they do not have equal tasks and they have different histories. To try to harmonise them and bring them all together in this glorious competitive enterprise takes no account of the number of things. When I hear my fellow countrymen
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talking of their own country—in which it is, I suppose, still legitimate to have some pride—I sometimes wonder whether they forget the burdens that this country bears.

If we are going to have harmonisation within the internal market should we not, for example, start off with harmonisation of defence expenditure? Defence expenditure creates a very considerable impact on the United Kingdom budget. It has a very considerable impact on our standard of living here. Yet what do we find? We find that the United Kingdom in 1984 spent some £30 billion on defence, which was more than the combined defence expenditure of Italy, the Netherlands, Belgium, Greece, Denmark, Ireland and Luxembourg. Yet we are supposed to be assessed as though we are on an equal basis—and incidentally we spent some £3 billion more than West Germany and some £4 billion more than France per annum. These are matters which have to be taken into account in determining the extent to which the internal market of individual countries and the collective can develop.

There are also diverse rates of interest. People talk as though the establishment of the movement of goods in Europe was the only point at issue. There are a number of factors which are not taken into account, and they certainly should be if there is going to be any future at all. I think, and I sincerely trust that Members of the Committee may be constrained to agree with me, that whatever views there may be about the internal market, and whatever views there may be about the ways in which the various countries of Europe should pursue their economic policies, it is profoundly unsafe to lay down principles as a dogma, either in the treaty or in resolutions applicable to all member states, regardless of their circumstances. It has never been attempted before and, in my view, it should not be attempted again.

Earlier today when I ventured to speak to your Lordships on the Motion, That the House do resolve itself into a Committee, I said with such seriousness as I could muster that very considerable economic troubles lay ahead for our country and that it would need all our individual and co-ordinated efforts within our own country and subject to our own governmental flexibility to extricate ourselves from the difficulties we shall shortly face, with the progressive decline not only in the value of oil supplies—which are our principal export to Europe—but also the decline in its price, which may or may not continue.

I said that the case for the large market guaranteeing prosperity was not proved. In fact the reverse is true, as a matter of experience. Austria has an inflation rate of 2½ per cent., with unemployment of about 2 per cent., and a per capita standard of life which is higher than our own. Similar observations apply to Sweden. There is no particular virtue in bigness. On the other hand, there may well be a virtue in compactness and in the flexibility of decision in acting in unison within a smaller area rather than within a larger area.

I would remind the noble Baroness, who will doubtless be charged with the enshrining of this particular internal market as official dogma enshrined in the treaties, that Japan, who is always held to be one of the leading examples of successful enterprise in the world, does not operate under these principles at all. In fact, if she reads the Financial Times of 20th
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September she will find that MITI and the Japanese Government have decided to invest £15½ million in Japanese industry in order to stimulate that industry and in order to stimulate not only demand but also investment, and to increase the productivity of their country.

The reason I have asked for the Committee's support for these amendments is that I consider it dangerous that these principles should be inscribed in the treaty and thereafter become inscribed on blocks of stone at which, no doubt, the Alliance will come to worship in due course. We should retain our own national ability to deal with our economic troubles and our own economic development in our own way, with as much co-operation with Europe as possible and with as much friendly exchange of views and commerce as we can possibly manage.

That should be done not in hostility but in co-operation, because they need us more than we need them. They need our markets for their manufacturers and they would be very sorry to have us out of it; so let us not consider we are in a position of inferiority in relation to them. I hope therefore that the Committee will support these amendments. I beg to move.

In its report on the European union the Select Committee of this Chamber on European Communities said:
The wider the home market which European industry can develop, the better equipped will it be to cope effectively in the world market".
That simple truth, repeatedly emphasised by the Select Committee in their report, is a fundamental reason why completion of the internal market must not be delayed.

They went on to say:
The Community has achieved much but progress is being held up because necessary decisions are not being taken, particularly in completing the internal market. The Community decision-making process will not be unblocked without more majority voting. This is essential.
Those words concerning the Community decision-making process being unblocked by more majority voting were considered essential by the Select Committee of this Chamber on the European Communities.

The main achievement of the Single European Act is to help unblock decision-making to enable us to achieve our long-standing goal of completing a common market in goods and services.That means the abolition of non-tariff barriers to trade, the freedom to provide services in which the United Kingdom is particularly competitive, and the liberalisation of air, sea and road transport. Those are issues which I may say have frequently been discussed in this Chamber. Indeed, the current trade barriers are estimated to cost the Community £7 billion a year and they cost this country a disproportionate sum.

I can confirm to the noble Lord, Lord Bruce of Donington, that our markets are open to our competitors. Their markets are not always open to us, so completing the internal market is not about opening our markets to competition which we shall not be able to match but rather about redressing the balance, and opening up opportunities in sectors such as financial
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services where we are indeed market leaders. That is why this Government have steadily campaigned to get the creation of what is now called a single large market, or, more simply, the internal market, put at the top of the Community's agenda.

In the beginning, we received little support from our partners, but over the past few years the reasons that convinced us of the need for a genuine internal market have convinced our partners, too. So long as Europe remains split up into 12 small national markets, many of them heavily protected, European business and industry stands no chance of competing with its counterparts based in the large unified markets of the United States and Japan. Our firms need a large market, both to give them the strength to compete on their own ground in Europe and as a springboard to compete on world markets.

As the noble Lord, Lord Bruce, is so assiduous in his researches on Europe, his researches will unquestionably have led him to recognise that not every one of the 12 countries who have signed the Single European Act are in fact pursuing policies that are indentical to those of Her Majesty's Government. Nevertheless, they recognise the advantages of the full internal market.

The large European market is not just in the collective interest of the member states; it will also be very much to the advantage of the United Kingdom. Our own market is among the most open in the world. The same sadly cannot be said for that of many of our partners and any British business man will tell you about the bewildering variety of formalities, procedures and outright barriers which he faces when he tries to sell in the European market. Creating the internal market means breaking down the barriers. We have few, while some of our partners have many, and the net result will in practice be to open up substantial new export markets to British business.

Article 13 of the Single European Act, to which the amendment now before us refers, would write into the Community treaties a clear and explicit commitment to the creation of an internal market by 1992. It is only by setting a clear target that we could hope to introduce the sense of urgency which we need if we are to make speedy and solid progress.

The second amendment, No. 9 on the Marshalled List, which we have been discussing, relates to Article 15 of the Single European Act which would require the Commission's proposals on the internal market to take account of difficulties faced by less developed economies in the Community and in suitable cases to allow for derogations.

We must, of course, preserve the broad principle of a unified internal market, but at the same time there has to be some flexibility to help cope with exceptional cases of difficulty. If there were no such flexibility, the Community would sometimes be forced to choose between ignoring the special difficulties of one member state and making no progress at all. A balance has to be struck. That is why this provision confers no right of derogations but obliges the Commission to consider proposing them. This should ensure that any departures from the principle of a unified market are strictly limited, both in scope and in duration. At the end of the day, it will always be for the Council to decide what special provisions, if any, are necessary.
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At present, a member state which wants to secure special provisions for itself can simply block a measure indefinitely until it gets its way. From now on, it will have to make a case for special treatment and persuade the Commission that a majority of member states accept it.

These provisions add up to a broad vision of a unified internal market, a commitment to achieve it by 1992 and a recognition that a unified market does not necessarily mean a uniform market. This is what we have always hoped the European Community would ultimately achieve. It is good for Europe and, more to the point, it is good for Britain. That is why I am convinced that these amendments must be rejected.

I listened carefully to what the noble Baroness said, as indeed I listened carefully to what my noble friend Lord Bruce of Donington said. I must confess that listening to the noble Baroness I had the feeling that I had been there before, for I heard all these arguments in 1972 about what Britain needed to revive her industrial potential, to sell more cars and to sell all sorts of other goods was the chill wind of competition from the EC. If only we would join the Common Market, that would cure us of so many of our ills.

I remember Sir Donald Stokes, who is now a distinguished Member of this House, writing to my constituents at British Leyland saying "You know, there is only one hope for your job in the car industry. There is only one way by which the British car industry can be saved. That is by remaining in the EC", and recommending therefore by implication that my constituents should vote accordingly. That was the story. That was what we were told.

We were told in 1972 and in the years before by representatives of both parties—I make no secret of that—that the great hope was this wider market, this home market of 250 million people; that would give us the great opportunities for expansion of our industrial base and for our exports. Those were the promises that were made. I can well remember people being told that their wages would rise almost overnight by £7 a week. and pensioners and other people were told that their benefits would rise to the level of the Common Market. Those were the things we were told about entering the EC and remaining in the EC.

I said at the start of these proceedings that we had no wish to curtail anybody's discussion of the amendments before the Committee, but I believe that, however strongly the noble Lord may believe that we should not have entered the Community, we are in it, and that is our starting point.

I accept absolutely what the noble Baroness has said, but to lead me to the point it is necessary to make the points I have already made. We were told originally before we went in that joining this large market was to be our salvation. That has not proved to be the case. Far from our industrial base expanding, far from being on the winning side in relation to trade, we find that in manufacturing trade our deficit has now reached the sum of £9 billion,
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whereas in 1972 with the original six members of the EC we ran a surplus.

Does the noble Lord recall that a year after joining the Community we had the benefit of a Labour Government for six years, which certainly did not assist our manufacturing industry and did not help the formation of an internal market for the benefit of the United Kingdom? We have still to live with the results of that.

Yes, indeed. But since the Labour Government left office in 1979 our manufacturing base has gone headlong downwards, and manufacturing output, in spite of what Mr. Paul Channon said on television this morning, is still 6 per cent. below what it was in 1979. Those are the facts.

Far from our membership of the EC giving us this great bonanza and saving our manufacturing industry from decline, we are now running a manufacturing deficit of £9 billion, the equivalent of more than 1 million jobs. We are told, "Ah, yes, but that is because we did not complete the internal market. If only we now proceed to complete the internal market everything will be hunky-dory, everything will come right". As I said, I have heard it all before. Indeed, to obtain the consent for this internal market the British Government have agreed, as we discussed earlier, to a certain sacrifice of their own sovereignty and the sovereignty of Parliament.

I do not believe that the noble Baroness can give this Committee the assurance sought by my noble friend Lord Bruce of Donington that by completing the internal market we will solve the deep-seated problems we have in this country which, in my view, have largely arisen as a result of our membership of the EC. There is in fact no guarantee of it and it may well be that far from improving our situation—

May I interrupt the noble Lord? Since our late and much lamented colleague Lord Kaldor was for ever telling us that the decline in the British Economy started at the end of the 19th century, how can our present plight be attributed to membership of the EC?

Of course it has declined, but I must go back to my original point. We were assured that the decline would be arrested by joining the EC. However, instead of the decline being arrested the decline has quicked and steepened.

We have not seen the benefits which were promised at the time of our entry, They have not been delivered. There is no guarantee that any promises will be met as a result of completion of the European market. There is a danger that far from benefiting from completion of the European market, we shall have the reverse—we shall suffer from completion of the European market. Whereas up to now we have suffered badly in relation
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to manufactured goods, we may very well suffer badly and adversely in relation to services, too. There is no guarantee that by completing the internal market the benefits which have been promised will flow. We are taking an enormous gamble. Frankly, it is a gamble which we should not take.

The destiny of this country depends not on joining, remaining in or expanding a market with a group of other people. Our destiny will be controlled by what we do here ourselves, on what leadership is given by this House, by government, by industry and by the trade unions. It is my belief—and I have said this before and I say it now—that over a long period of time there has been a failure of leadership in this country. The country has not been told what are the real remedies. There has not been sufficient courage to impose those remedies. I am afraid that that is still the case. Courage is lacking. We are looking for panaceas, but they will not work.

I think it is probably right, as the noble Baroness said and as I said earlier, that this is not an argument on whether or not we stay in the European Community. We are in the Community and that was decided by a referendum.

What I find disturbing is that at the time of the referendum many Members of the Liberal Party, if not all of them, were telling us that membership would save our bacon; that we must go in. We now have the noble Baroness, Lady Seear, telling us that we cannot place the blame for the terrible plight that we are in—and we are in a serious plight—on our membership of the EC.

I listened to the noble Baroness, Lady Young. I could not believe, from what she said, that we are in such a frightful situation. I could not believe that we have roughly 4 million Britons on the dole, unemployed, going to waste. I could not believe that the construction industry of this country is crumbling, despite joining the EC. I am not going to say that it is because we joined the EC that we are in this awful situation, but what is beyond dispute is that this nation of ours is in a serious and appalling situation because of the management of the Conservative Government. That cannot be denied unless you are going to say that we have no unemployment; there is no crisis in the health service; education has not become a talking point of vital importance throughout the nation; we can house the people of this country; and there has been no dramatic and appalling decrease under Conservatism in law and order in Great Britain. If you ask what all this has to do with the EC—

As the noble Lord said, we are discussing the amendment. We do not want to discuss too much his attitude at various times. Right or wrong, I have remained here where I believe I ought to be. One does not run away because things are going wrong. This cannot be said of some other people. The mass of the ordinary people do not understand what the Single European Act and these articles under discussion are about, and they wuld not be too concerned whether they remained part of the Single European Act or whether the amendment from the Labour Benches was accepted.

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I find it very disturbing that that should be the situation throughout this nation; that so few of our fellow Britons understand what is at stake. The noble Baroness told us that in all that is happening in Europe there is no actual unity, and there is not the same sort of government everywhere, and I think that is a very good thing. But what is very bad is this. There is not much use in saying that one of the joys of being part of the European Community is that there are a few countries which are even worse off than we are. I do not see the sense of that whatsoever.

If we had time to explain to a class of average people what is involved in the Articles under discussion, I believe there would not be much hesitation in ordinary folk joining the Labour side of this ancient Chamber and deciding that we ought to accept these amendments tonight. That is for not any political reason, but because we have to put our country first and move much more cautiously and steadfastly. We have to start putting what is wrong with this country right before we embark on threatening our future with some of the things suggested in the Single European Act. It is on that simple basis that I believe that we ought to support these amendments tonight.

I am sorry that the Minister has not been able to be more forthcoming; but in view of the lateness of the hour and the distinguished quality of your Lordships who remain, I think it would be best to ask the Committee for leave to withdraw the amendment.

moved Amendment No. 10:
Page 3, line 13, after ("Communities)"), insert ("but not Article 26 thereof").
The noble Lord said: I beg to move Amendment No. 10 standing in the name of myself and my noble friends. I should also like to speak to Amendments Nos. 11, 12, 13 and 17, which for the purpose of saving time have been grouped in order that they may be discussed together.

It is important that we know just what the effect of Article 16 of the Single European Act will have on the treaty.

Once again, for the wider information of the public who may be interested, as well as for members of the Committee and for purposes of the record, I should like to inform the Committee exactly what effect the amendments that are proposed to the treaty in Article 16 will have. Article 16 refers to Article 28 of the EEC Treaty which is now to be replaced. Before amendment Article 28 reads as follows:
Any autonomous alteration or suspension of duties in the common customs tariff shall be decided unanimously by the
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Council. After the transitional period has ended, however, the Council may, acting by a qualified majority on a proposal from the Commission, decide on alterations or suspensions which shall not exceed 20 per cent. of the rate in the case of any one duty for a maximum period of six months. Such alterations or suspensions may only be extended under the same conditions, for one further period of six months".
The new article, which supersedes Article 28, to be put into the Treaty of Rome merely states:
Any autonomous alteration or suspension of duties in the common customs tariff should be decided by the Council acting by a qualified majority on a proposal from the Commission".
When the noble Baroness comes to reply, I should like a further explanation from her as to exactly why the restrictions contained in the former article have given place to the rather shorter form as in the proposed change. I am not expressing any particular antagonism to it: I should just like the explanation of it.

Then in paragraph 2 of Article 16 there is a reference to Article 57 of the Treaty of Rome. The Committee will recall that Article 57 is within that section of the Treaty of Rome that gives the right of establishment. I quote from paragraph 1 of Article 57 which deals with a measure:
In order to make it easier for persons to take up and pursue activities as self-employed persons".
which is the whole context of the matter. When it is amended by paragraph 2 of Article 16 in the Single European Act, Article 57 of the treaty will read as follows:
For the same purpose, the Council shall, before the end of the transitional period, acting on a proposal from the Commission and after consulting the Assembly, issue directives for the coordination of the provisions laid down by, law, regulation or administrative action in Member States concerning the taking up and pursuit of activities as self-employed persons".
Then the last point is inserted by paragraph 2 of Article 16 and it now says:
Unanimity shall be required for directives the implementation of which involves in at least one Member State amendment of the existing principles laid down by law governing the professions with respect to training and conditions of access for natural persons".
That is how it now reads, and it is up to the Committee to decide whether this amendment will in fact serve the purpose described.

I am bound to declare an interest, although not a personal one, in the establishment particularly of professional bodies overseas. The Committee will remember—although it does not arise under this section, and I do not know how it will be influenced now when the new single Act comes into operation—that since 1975 insurance firms operating in the non-life field have been trying to operate in Germany. The first time that I saw the directive was when I was a member of the Budget Committee and the Economic and Monetary Affairs Committee of the European Parliament. I well recall how matters were filibustered, not by the Council but by the Parliament.

One of the characteristics of the Parliament is that it is manned by nationals of various states, including our own. The British employees do not always maintain the continuity with their Government that the German or French staff maintain with their governments. They do not always operate in the disinterested and impartial manner which is supposed to be the characteristic of European parliamentary
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staff. As a result, as the noble Lord is well aware because I have complained aboout it before, the matter was filibustered, by the simple machinery that every time it was put on the agenda by the British, including myself, mysteriously neither the French nor the German rapporteur turned up and therefore the subject was not discussed. Then, for some mysterious reason, it was forgotten and not put on the agenda for the next meeting.

There are all kinds of dodges of which the noble Baroness, Lady Elles, is well aware. They probably no longer continue in the European Parliament. I am all for the adoption of this clause if it assists in any way in that respect, but I prefer to leave it to the Committee's judgment.

Article 59 deals with services and covers the matter that I have just been discussing. The only alteration to Article 59 on services is that:
The Council may, acting on a qualified majority, on a proposal from the Commission, extend the provisions of this chapter to nationals of a third country who provide services and who are established within the Community.
The rigid enforcement of that would probably be of material assistance to the service industry concerned. However, I am bound to say from bitter experience that the only nation that enforces Community law to the letter is probably the United Kingdom. If anyone can cross his heart and say the same about our good friends across the Channel, I should be delighted to hear any tributes to the meticulous manner in which they apply the regulations.

Paragraph 4 deals with a most important matter. I give notice that I am bound to divide the Committee on this amendment unless I have the agreement of the Committee. In our present economic circumstances this is possibly the most important matter. Article 70 states:
The Commission shall propose to the Council measures for the progressive co-ordination of exchange policies of Member States in respect of the movement of capital between those States and third countries".
The old wording was:
For this purpose the Council shall adopt directives by unanimous decision. It shall endeavour to obtain the highest possible degree of liberalisation".
That has now been eliminated.

I hoped that the noble Lord, Lord Bruce-Gardyne, would be present when this matter was discussed, because he is interested in City matters; but no doubt he will read the Official Report tomorrow. The proposed wording is now:
For this purpose the Council shall issue directives, acting by a qualified majority. It shall endeavour to attain the highest possible degree of liberalization. Unanimity shall be required for measures which constitute a step back as regards the liberalization of capital movements".
Here we have an example of the ratchet effect of legislation relative to the Community. Anyone in this Chamber who, in present circumstances, would seek to justify an attempt to achieve and to make permanent the liberalisation of measures dealing with the movement of capital and the exchanges—I say this with the greatest possible respect—needs to have his or her brains examined. Exchange rates vary from day to day between countries. It has nothing to do with any alleged stability implied by the European Monetary
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System. A price has to be paid for stability. The question that arises is stability at what level.

Interest rates at the moment vary between countries. These rates, as the Chancellor of the Exchequer has belatedly found out, have a profound effect upon the movement of capital in and out of the country to third countries. I shall give figures to show how interest rates—these are prime lending rates for commercial banks—vary. In Belgium, the figure is 10.5; in Germany, 7; in Holland, 7; in Italy, 13.5; in Spain, 14.5; in Switzerland, 7.25; and in the United Kingdom, 11. Anyone who can think, in those circumstances, of freeing everything, must not understand at all how the economic system works. Everyone knows that liberalisation of the ability to dispatch capital wherever it can find the highest interest rate or wherever, on a speculative basis, it can expect a higher return either for venture investment or permanent investment, means that billions and billions of capital slushes to and fro across the world day by day causing violent exchange rate fluctuations and causing defensive or attractive measures—the stick and the carrot in respect of the movement of interest rates.

In its wake, this leaves people. It leaves enterprises which cannot move with the speed of light to follow capital wherever it goes across the world. The people in the little streets of Britain are tied in the main to their localities. When capital moves out and when prospective resources move away—resources that could be used for investment—it is their futures that are in hock. The results are already apparent in Europe. Just as the pursuit of these kinds of policies within the United Kingdom has produced regional differences with money pouring into the more profitable sections, while the life is sucked out of the poor sections, so it is on the Continent of Europe.

The peripheral countries of the Community are those that contain the distress areas. Meanwhile, people in the golden triangle of Frankfurt, Paris, London, and possibly Amsterdam, attract the money. They attract money against which no regional fund can ever make any impact. After all the adventures in regional development—we pay almost as much as we receive—the poor parts of the Community are getting poorer and the rich are getting richer. This is a time when the situation in Europe and, for that matter, in the world requires intelligent investment and planning on the same lines as is being carried out in Japan while maintaining free enterprise. To talk of further liberalisation in these circumstances must be complete folly.

I am sorry to have to speak so strongly about this matter, but Members of the Committee will recall that some of the speeches I have made—however long I regret they may have been over these past few years—have still to be proved wrong. In the debates I have taken part in since 1979, when I spoke on economic affairs, my main predictions have unhappily come true. I sincerely trust, bearing in mind that this treaty may have to go for revision, that the Committee, in its wisdom, will see fit to remove this clause in relation to the Single European Act. It bodes very badly indeed for the whole future of our economy and will put us in extreme danger, particularly in the next couple of years. I beg to move.

I should like to pay tribute to the way in which the noble Lord, Lord Bruce, has deployed the argument before the Committee. I shall be very brief. The argument on the interest rates is not so readily understood because there is no formal or legal obligation involved. If I am wrong on this I would seek immediate correction. However, this amendment, and the grouped amendments, affect the implementation of the internal market. As I think has been said before, it has been agreed by Ministers that there must be a measure. These measures of further devolution of power—if you like, surrender of sovereignty—from the parliament, not just of our parliament but each of the member states, on matters governed within the domain of the three treaties, are simply to establish completion of the internal market by 1992.

The noble Lord, Lord Bruce, quoted from the treaty. He referred to a transitional period. That was the third section of the 12-year transitional period which should have been completed by 1969, three or four years before we acceded to the Common Market. Surely, if one is taking an objective stance on this matter, what was not achieved before we went in ought to be achieved within some measurable prospect of time after we have entered. This situation simply cannot be reached unless the decision-making process involved in achieving this internal market were to be unblocked as proposed by this Bill, the SEA, and as recognised in Stuttgart and Milan.

Is it right that we should now suddenly crash the gears into reverse, and for some totally illogical and unsupportable reason say, "We do not want to achieve the internal market. What is the object of achieving it?" If we do not want to achieve it, we should resign or withdraw. On this I totally accept the integrity of purpose of the noble Lord, Lord Bruce of Donington, and accept that that is not the object of the exercise. But he will accept the sincerity of my view that if he presses any single one of these amendments that will be the realistic effect. For those reasons, I would oppose the amendment.

The amendment now before us. No. 10, would delete Article 16 of the Single European Act, under which qualified majority voting would be extended, subject to certain qualifications, to 5 provisions where the treaty currently requires unanimous decisions. All these articles are directly related to the internal market.

It may be helpful to the Committee if I explain briefly why member states came to the conclusion that some extension of majority voting was desirable, and why the particular articles covered by this amendment were selected.

First, as the Committee will know, over 40 articles of the treaty already provide for decisions to be taken by a simple or qualified majority. These include a number of articles directly related to the internal market, for example articles relating to the right of establishment, the freedom to provide services and common policies on inland transport. So, the possibility of majority voting on matters affecting the internal market is certainly not a radical innovation.
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I have already referred to the disappointing rate of progress over the last few years on internal market questions generally. Member states, including the United Kingdom, came to the conclusion that one of the reasons why progress had been slow was that individual proposals were frequently blocked for months, and sometimes for years, by one member state in isolation, all too often over a relatively minor point of special interest to it. Member states therefore came to the conclusion that their interests would be better served, both individually and collectively, by some extension of the existing scope for majority decisions. The Government fully agree.

Turning now to the specific provisions covered by Article 16 of the Single European Act, the first of these is Article 28 of the treaty, under which autonomous alterations or suspensions of common customs tariff duties are made to meet changing market conditions. I should emphasise that we are not talking here about the general common customs tariff regime, which is one of the major trade policy questions which falls to be decided under Article 113. What we are talking about here is a large number of detailed tariff suspensions for particular products to facilitate imports into the Community (or occasionally to make them more difficult) where changing market conditions require this. Over a thousand such detailed tariff suspensions and alterations are made each year. Many of them are already subject to majority voting under the existing terms of Article 28. The Single European Act will ensure that all of them are subject to majority voting. This should make it easier to meet fast moving changes in the market conditions. In view of this, and of the fact that the general common customs tariff regime is already subject to majority voting under Article 113, I hope the Committee will agree with me that this change will be a useful one.

The second article affected is Article 57(2), under which decisions are taken to facilitate the pursuit of activities as self-employed persons throughout the Community. The effect of the Single European Act will be to narrow slightly the areas in which member states can block progress in this important area by invoking the unanimity rule.

Next we have Article 59, which provides for the progressive abolition of restrictions on the freedom to provide services in the Community. At present, decisions can be taken by qualified majority where Community nationals alone are affected, but must be taken by unanimity if third country nationals are involved. Most Community measures relating to services apply equally to Community nationals and to nationals of third countries who are formally established within the Community. The net result is that the unanimity requirement for third country nationals prevails, and most decisions have to be taken by unanimity.

The Single European Act would ensure that measures relating to the freedom to provide services should be taken by qualified majority regardless of whether they covered third country nationals of the kind I have described. This would make it easier for the Community to make rapid progress on opening up the market in the provision of services, an area where
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the United Kingdom is particularly well placed to benefit from an open European Market.

The noble Lord, Lord Bruce of Donington, asked about the prospects for non-life insurance services directives in opening up the German market. I can confirm to him that we hope that the change to Article No. 57(2) will make it easier to secure the adoption of the long standing draft directive on non-life insurance services. Indeed some noble Lords may also be aware that the European Court is shortly expected to give judgments on a group of very important cases on insurance and co-insurance. We hope that the court's judgment will clearly establish the principle of freedom to provide services in this sector. This would give the best possible impetus to renewed work on the draft directive, which we hope to begin before the end of our presidency. I hope that this is the kind of indication of the way in which we see the opportunities for business, particularly in services where we as a country are strong in this larger internal market.

Finally, I turn to Article 70(1), which is covered by Amendment No. 12, under which unanimity is currently required for directives aimed at liberalising the movement of capital between member states and third countries. Liberalisation of such movements has to take place in step with liberalisation of capital movements within the Community, since otherwise you could sidestep one member state's restrictions on capital movements to third countries by channelling capital through another member state (such as the United Kingdom) which does not impose such restrictions. Liberalisation of capital movements involving third countries is thus essential if a free capital market inside the Community is to be achieved. Such a market is in turn essential if we are to achieve a free market in financial services. I need hardly remind the Committee that a free European market in financial services would represent a major opportunity for British business, and in particular for the City of London.

The change brought about by the Single European Act should bring this day nearer by making it easier to adopt measures aimed at liberalisation, while leaving the existing position unchanged for measures which represent a step away from liberalisation. Member states will of course continue to be able to invoke the provisions of Article 73, which allow for protective measures in certain circumstances where capital movements lead to disturbances in the functioning of a member state's capital market.

Article 16 would also extend qualified majority voting to the formulation of Community policies for sea and air transport, in line with the existing voting requirements for inland transport in Article 75 of the treaty. It is no accident that Community policies on inland transport, and in particular the progressive liberalisation of road haulage, are relatively well developed, while common policies on aviation and shipping, which are just as desperately needed, are still the subject of difficult negotiations. The introduction of majority voting should help put right this imbalance.

I have gone into this in some detail, but these amendments are important. The issues raised are important, and I wished to give a full response to the
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detailed points which have been raised. We believe that these are areas in which the introduction of majority voting should make it easier for us to achieve the Community policies for which the United Kingdom has consistently argued, and in particular should bring closer the day when we have a genuine common market in Europe—the name by which the Community is so widely known in this country but which is not in fact true in Europe.

Lord Bruce of Donington

I am most grateful to the noble Baroness for her reply. I should be glad if she could inform me whether, in pursuit of Article 16, she has had a chance to see the proposal for a Council directive amending, for the third time, the first Council directive for the implementation of Article 67 of the EC concerning the liberalisation of capital movements. Can the noble Baroness give some indication to the Committee which way Her Majesty's Government's representatives voted when this was presented to the Council? The noble Baroness will be unable to obtain the detailed text and certainly to examine it in the course of the debate this evening. However, we are, after all, seeking information and I should particularly like to know just what the Government's attitude was to this directive, which is "COM (86) 326 final of llth June".

The report that appeared in the Financial Times on 17th June was that the Commission exchange control aims were welcomed by the Council in that they concerned all remaining capital restrictions on the import and export of capital from inside and outside Europe. Was that welcome shared by Her Majesty's Government? If so, in the light of the events which have occurred during the past week and during this week and which may possibly resume once the party conferences are over, will they still welcome the enactment or the approval of the proposal COM (86) 326 final to which I have referred?

The Committee will recall that I indicated I was discussing Amendments Nos. 10, 11, 12, 13 and 17 together. May I ask the noble Baroness before we part from this whether she will pass some observation on the provisions of Article 17, which deals with the harmonisation of indirect taxation? While she is commenting upon the Government's attitude towards Article 17, no doubt after mature consideration, perhaps she would on this occasion give me the answer to a question that I posed to her when we were discussing a previous amendment. I asked for the Government's attitude towards the case brought by the Commission against Her Majesty's Government, requiring them to levy a 15 per cent. VAT upon new buildings. She did not reply to that point at the time, doubtless because she was refreshing her memory from the Officials Box. But since the harmonisation of excise duties and indirect taxation is comprised in the provisions of Article 17, she might find in passing the comment on Article 17 which I now have formally to request that she can also make an observation on the VAT position.

The Committee will recall that Article 20, which is incorporated in Amendment No. 17, was also within the grouping which was dealt with. However, in the interests of brevity I passed no individual comment on Amendment No. 17. I should be glad to have the
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comments of the noble Baroness on Amendment No. 17, which, as she will realise, refers to co-operation in economic and monetary policy and makes certain very important provisions. Those, as the Committee will know, will now be formally incorporated in a treaty and, owing to the operation and the way in which the ratification has taken place, will be incorporated into British law. I should like some comments from her as to the effect Her Majesty's Government expect as a result of the application to the United Kingdom of Article 20, the measures dealing with co-operation on economic and monetary policy.

I trust that a suitable degree of caution will prevail; the same degree of caution which led the noble Lord, Lord Bruce-Gardyne, and myself to refrain from making any observation on the economic and monetary situation when the House resumed on Monday. Perhaps a little caution may be required here, but one would like to be informed as to what advantages Her Majesty's Government expect from the incorporation of Article 20.

I shall do my best to answer all the specific points that the noble Lord, Lord Bruce of Donington, has raised. I shall write to him about the first point, because it is something which I think even he will accept is somewhat wide of the amendments on the Marshalled List. I shall let him have a note on it.

On Amendment No. 13, the question of tax harmonisation, the new Article 99 is not a commitment to tax harmonisation: it provides only for harmonisation to the extent necessary to complete the internal market by 1992. It is more restrictive than the old Article 99 which provided for tax harmonisation "in the interest of the Common Market". It is of course for discussion how far, if at all, the present differences in tax rates between the member states need to be reduced in order to complete the internal market but nobody can force us to change our tax rates. Such decisions remain with the Chancellor of the Exchequer and any change to the existing Community rules would require unanimity.

On the point about VAT zero rating in this country, which I think the noble Lord also raised, this is unaffected by the changes to Article 99. Zero rates are expressly provided for under an existing directive which could only be changed with the agreement of the United Kingdom.

If I can continue with this, the Commission is currently challenging the United Kingdom's interpretation of a provision of the second VAT directive which permits zero rating for "clearly defined social reasons and for the benefit of the final consumer". The Commission is only challenging our zero rates to the extent that they do not clearly fall into this category. The vast bulk of items currently zero rated—that is, food, children's clothes and supplies of gas and electricty to the final consumer—are not affected. We are fighting the case vigorously in the European Court but I must stress that it predates the
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new Article 99 and is not in any way affected by it. I hope that that counts as the kind of assurance which the noble Lord wishes to have.

The final point to which I was going to turn was Amendment No. 17 which is grouped in this. The amendment to the European Community Treaty contained in the new Article 102A merely refers to the existing EMS arrangements. Member states already have an obligation to co-ordinate their economic policies. That is under Article 105(1) of the European Community. The Commission already has a right under Article 235 to make proposals in the monetary sphere. The regulations setting up the European Monetary Co-operation Fund and establishing the ecu were adopted under Article 235 and the reference in the Single European Act to co-operation between member states in this area is to co-operation in accordance with the objectives of Article 104 of the existing treaty so that it contained no new obligations.

The Single European Act stipulates that any institutional developments in the field of economic and monetary policy would be governed by Article 236—that is to say, they would have to be agreed by all member states and approved by their national parliaments.

The amendment would change the substance of the Single European Act as agreed by the heads of government and signed by all member states and would make it impossible for the United Kingdom to ratify the treaty. That I hope covers the point which is raised by Amendment No. 17. I hope therefore that I have covered in my remarks the four amendments which the noble Lord, Lord Bruce of Donington, moved. They are important ones. I hope I have given him the answers to all the points that he has raised and I have indicated to him that I shall write to him on the one point which I have not answered, and I hope that, in these circumstances, he will feel able to withdraw his amendments.

Lord Bruce of Donington

I am most grateful for the noble Baroness's reply. I take it that when the noble Baroness writes to me on the matters—something which she has been so kind as to undertake to do—she will at the same time place a copy in the Library so that it will be available for general consideration.

I would have brought the Committee to a vote on Amendment No. 12, dealing with this "ratchet" paragraph of Article 16, which I regard as wholly objectionable. However, I am advised verbally—and it is confirmed visually—that I would be most unlikely to carry a majority of your Lordships with me in voting for this amendment, which I deem to have a dangerous ratchet effect, to be inserted in any Bill. All I can do, therefore, is to warn your Lordships that the time may come when you will regret not having sent this particular part of a clause back to another place for reconsideration.

I can say no more. I regret being a Jeremiah in this matter but I have had some experience of matters of this kind. Having said that, and with as good a grace as I can muster, I ask the leave of your Lordships to withdraw the amendment.
Amendment, by leave, withdrawn.

moved Amendment No. 14:
Page 3, line 13, after ("Communities)"), insert ("but not Article 18 thereof").
The noble Lord said: I beg leave to move this amendment, which deals with the application of Article 18 and supplements Article 100 by Article 100A. Article 18 says:
By way of derogation from Article 100"—
and I propose to read that to your Lordships because I think there will be merit in studying this in the passage of time, when events have caught up with us, as eventually they will. Article 100 deals with the approximation of laws. It reads:
The Council shall, acting unanimously on a proposal from the Commission, issue directives for the approximation of such provisions laid down by law, regulation or administrative action in Member States as directly affect the establishment or functioning of the common market.The Assembly and the Economic and Social Committee shall be consulted in the case of directives whose implementation would, in one or more Member States, involve the amendment of legislation.
Having referred to the amendment of legislation, and in the absence of the noble and learned Lord, Lord Edmund-Davies, I invite your Lordships to pay attention to the report in Hansard tomorrow of what he said about the amendment of legislation as affecting the United Kingdom.

Article 18 provides that there shall be added two clauses to those which I have already read to your Lordships. These read as follows:
By way of derogation from Article 100 and save where otherwise provided in this Treaty, the following provisions shall apply for the achievement of the objectives set out in Article 8A.
Your Lordships will recall that Article 8A, as amended, made certain stipulations for the development of the internal market.
The Council shall, acting by a qualified majority on a proposal from the Commission in co-operation with the European Parliament and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.2. Paragraph 1 shall not apply to fiscal provisions, to those relating to the free movement of persons nor to those relating to the rights and interests of employed persons.
Perhaps I may pause there for a moment and say to the noble Baroness, so that she may make a note of it, that I should be grateful for the Government's interpretation and definition of the term "fiscal provisions". I should like to know what the Government understand by those words, as they appear in paragraph 2 of this new Article 100A. For the moment I will continue reading the new article. It reads:
3. The Commission in its proposals envisions that paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection.4. If, after the adoption of a harmonisation measure by the Council enacted by a qualified majority, a member state deems it necessary to apply national provisions on grounds of major needs referred to in Article 36, or relating to the protection of the environment or the working environment, it shall notify the Commission of these provisions.The Commission shall confirm the provisions involved after having verified that they are not a means of arbitrary discrimination or a disguised restriction on trade between member states.
I would then draw to the noble Baroness's attention
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the next paragraph, to which I and, I think, Members of this Committee will attach some importance.
By way of derogation from the procedure laid down in Articles 169 and 170, the Commission or any member state may bring the matter directly before the Court of Justice if it considers that another member state is making improper use of powers provided for in this Article.
In its present form, that gives sanction for the type of action to which we have referred many times today. We must remember that these will be applicable in British law as well as elsewhere. This is exactly the kind of provision which begins to derogate from the national sovereignty of our country.

Then, at paragraph 5, we read:
The harmonisation measures referred to above shall, in appropriate cases, include a safeguard clause authorising the member state to take, for one or more of the non-economic reasons referred to in Article 36, provisional measures subject to a Community control procedure.
These are the derogation procedures. I should like more detailed information from the Government as to how they see the application of the particular clause to which I have referred.

Article 19, which is taken at the same time as Article 18, being another amendment, deals with the requirement which is put into law for the Commission to make an inventory of national laws, regulations and administrative provisions which fall under the particular section dealt with in the previous amendment and which have not been harmonised pursuant to that article. It then states:
The Council, acting in accordance with the provision of Article 100A, may decide that the provisions in force in a member state must be recognised as being equivalent to those applied to other member states.
May I repeat the words,
member state must be recognised as being equivalent to those applied by another member state",
because I should like the Government's interpretation of them. What is behind what, for the moment, I regard as civil servant's gobbledegook? I should like some indication as to exactly what is meant.

Paragraph 3 of Article 100B then states:
The Commission shall draw up the inventory referred to in the first subparagraph of paragraph 1 and it shall submit appropriate proposals in good time to allow the Council to act before the end of 1992.
There we are with an approximation of the laws which were reviewed by this Chamber back in 1978–79. I have the report here. Since the reports of Select Committees of this Chamber have been read in admonition of me, I should like to draw the Committee's attention to what the Select Committee said at paragraph 7 of section 22 of House of Lords Paper No. 131, 1977–78, dated April 1978. It reads:
Above all, the Committee wish to draw attention to what they have said in paragraph 15 above" —
that refers to a tendency in the Commission to harmonise for harmonising's sake—
since the exercise by the Council of the powers given by Article 100 of the Treaty causes an irreversible removal of legislative power from the United Kingdom Parliament".
That is something to which the noble and learned Lord, Lord Denning, referred. The report continues:
It is essential that the limits of the Article 100 powers should be more strictly defined and that the Government should undertake to keep within them".338
It is a long time ago, but I think that the admonition still stands. What action have the Government taken, in the eight years that have elapsed since this Select Committee report, in honouring the recommendations of the Select Committee? I am quite sure that the Committee would like to know and that the Minister is only too anxious to reply to the satisfaction of the Committee. I beg to move.

The purpose of the amendments which are now before us, introduced by the noble Lord, Lord Bruce, is—and to some extent I am perhaps reiterating what he said—to remove from the scope of the Bill the new Articles 100A and 100B which would be introduced by the Single European Act. My noble friend has already explained the importance which the Government attach to the creation of a genuine internal market because of the benefits which this would bring to Britain. As this Committee will be aware, British business and industry strongly support the line which we have been taking with our Community partners; and I would emphasise this in the light of some of the comments that have been made to the contrary.

My noble friend also explained the reasons why we, along with the other member states, believe that some extension of the scope for majority voting will make it easier for the Community to take the decisions which have to be taken if we are to achieve the internal market by 1992. The new Article 100A has a very important part in all this. It should lead to faster progress across a wide range of detailed internal market issues. At the same time, as my noble friend explained during our debate on Second Reading of the Bill, we have retained explicit exclusions and safeguards in areas of particular importance for national policy, such as taxation, the free movement of individuals, the rights and interests of employed persons and questions of health.

The second of the amendments before us, Amendment No. 15, refers specifically to the third paragraph of the new Article 100A, under which the Commission is to have its proposals concerning health, safety, environmental protection or consumer protection on a high level of protection. The purpose of this provision is to ensure that where high national standards already exist in these areas, as they do in the United Kingdom, these are not compromised by the doctrine of lower harmonised standards. For example, in the area of animal health we require high national standards not only because they are desirable in themselves but also because our animals are both protected from some diseases by our island position and, at the same time, are more vulnerable to them through lack of previous exposure. The Single European Act thus gives us double protection; first, because the Commission is required to take a high level of protection as its starting point; and, secondly, because we can preserve our high national standards under the special safeguard procedure laid down in the fourth paragraph of Article 108.

The third amendment before us, Amendment No. 16, refers to the new Article 100B. This provision is intended to ensure that as 1992 approaches the Community takes careful stock of what still needs to be done to complete the internal market in areas
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falling within Article 100A. Given the openness of our market the United Kingdom is likely to have more to gain and less to hide from this inventory than most other member states. It will be very much in our interests that any remaining obstacles to the creation of the internal market should be clearly shown up.

It will then be up to the Council to decide how far it wishes to act on the Commission's inventory. Where it decides to act, it will be able to do so either in accordance with the normal practice under the existing treaty rules or by way of mutual recognition. This does not mean that the Council would decide that the standards in any one member state should be adopted by everybody else but it would enable the Council to decide that member states should give mutual recognition to each other's national standards in particular areas in order to allow the free circulation of goods.

We have discussed the Single European Act's provisions on the internal market at length and in some detail. As my noble friend said earlier, a genuine Common Market was one of the main things we hoped to achieve when we joined the Community. We now have for the first time a firm and clear commitment on the part of all member states to achieve this goal together with a firm target date and a set of procedures to speed up the necessary decisions. This is not just good for the Community, as my noble friend has already said; it is good for Britain. Therefore we hope that these amendments will be withdrawn.

I have noted the specific and detailed questions raised by the noble Lord. Perhaps he will forgive me if at this late hour I undertake to write with the detailed definitions that he requested.

Lord Bruce of Donington

I am most grateful for the reply given by the noble Baroness. She will understand that it by no means satisfies me but I note that she is going to make further inquiries concerning specific points that I raised. On the basis that I shall receive replies by letter to the outstanding points that I have made, and that the letter will be placed at the same time in the Library, I ask leave to withdraw the amendment.

moved Amendment No. 18:
Page 3, line 13, after ("Communities)"), insert ("but not Articles 21 and 22 thereof").
The noble Lord said: It may be for the convenience of the Committee if together with this amendment we take Amendment No. 19. These are in the nature of probing amendments. I do not understand what the Single European Act is getting at in this respect. I hope we shall have some information from the noble Baroness when she replies. The existing Article 118 states:
Without prejudice to the other provisions of this Treaty and in conformity with its general objectives, the Commission shall have the task of promoting close co-operation between Member States in the social field, particularly in matters relating to: employment; labour law and working conditions; basic and advanced vocational training; social security; prevention of occupational accidents and
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diseases; occupational hygiene; the right of association, and collective bargaining between employers and workers.To this end, the Commission shall act in close contact with Member States by making studies, delivering opinions and arranging consultations both on problems arising at national level and on those of concern to international organisations.Before delivering the opinions provided for in this Article, the Commission shall consult the Economic and Social Committee.
I do not know how far Article 118 has been complied with. Workers at GCHQ might think that we have not complied with the provision which relates to,
the right of association, and collective bargaining between employers and workers".
Have we, in fact, complied with that? Article 21 seems to go considerably further. Indeed, on the face of it the provisions might be welcomed. They state:
Member States shall pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers, and shall set as their objective the harmonisation of conditions in this area, while maintaining the improvements made.In order to help achieve the objective laid down in the first paragraph the Council, acting by a qualified majority on a proposal from the Commission, in co-operation with the European Parliament and after consulting the Economic and Social Committee, shall adopt, by means of directives, minimum requirements for gradual implementation, having regard to the conditions and technical rules obtaining in each of the Member States.
What on earth does that paragraph mean? Does it mean that the Government of this country will now be obliged to set standards in this regard by majority vote of other countries within the EC? If so, and it can be done not by unanimity but by qualified majority, is it not the case that other countries—not our own Parliament, but other countries in the EC acting with the European Parliament—will be able to impose financial burdens on this country to which our own Parliament has not agreed? That is the worrying point. Here again the control of the British Government, even over internal expenditure, will now be qualified by other countries whose backgrounds and whose history in these matters may be completely different from ours. In fact, our own Parliament could have imposed upon it expenditure for which they would have to tax but over which they would have no control. I hope Members of the Committee understand what I am getting at because the objectives of these articles are not in dispute. It is the effect of them that worries me. Certainly it says:
Such directives shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized undertakings.
But how is that to be achieved? Is it to be achieved by saying: "Oh yes, certain firms with more than a given number of employees must impose these conditions, but others may not? Or shall we be told, by qualified majority, that the British Government's ideas on this are not acceptable and that all firms shall be subject to the new regulations, whatever they may be? Is that going to be acceptable to Her Majesty's Government? That may be acceptable to me; it may be acceptable to the Opposition; it may very well be acceptable to the Liberal and SDP Benches; but I think even they would agree that such an imposition may not be acceptable to the Government, bearing in mind their record in the social and employment fields. So it would be useful to have the view and the explanation of the noble Baroness on Article No. 21. Of course, paragraph 3 of that article says:
341The provisions adopted pursuant to this Article shall not prevent any Member State from maintaining or introducing more stringent measures for the protection of working conditions compatible with this Treaty.
I for one am very pleased about that. Whether the Government will act upon that, I do not know.

Then we come to Article 22:
The EEC Treaty shall be supplemented by the following provision: 'Article 118B. The Commission shall endeavour to develop the dialogue between management and labour at European level, which could, if the two sides consider it desirable, lead to relations based on agreement.'
I have thought about that deep and hard, but I do not know what that means. I think the House is entitled to have a full explanation of what it means. Does it mean, for example, that the Commission is going to develop a labour relations policy? Is the Commission going to be able to intervene in matters of trade union rights, for example? It could mean that. I do not know. It seems obscure to me.

Before I speculate any further about what it could mean, and what further powers this could give to the Commission acting on its own, not in concert with the Council, what could the Commission do and what would be the intention under Article 22? I hope that the noble Baroness will be able to give me some explanation, will indeed satisfy me that Articles 21 and 22 are innocuous and that I need not worry about them, and that your Lordships need not worry about them.

I hope that I shall be able to satisfy the noble Lord, Lord Stoddart. The new Articles 118A and 118B are intended to make further provision than exists in the present treaties for certain aspects of what may broadly be described as social policy. Therefore I think that they are the sort olobjectives that he himself would accept.

First of all, let me explain Article 118A. This recognises the importance of health and safety at work and the need to improve the working environment, and therefore it introduces majority voting for setting minimum standards. The United Kingdom standards in this area are already among the highest in Europe, and the main effect of this new provision is therefore likely to be a gradual improvement in minimum standards elsewhere in the Community. I was somewhat surprised by some of the remarks made by the noble Lord, because what he appeared to be saying was that these articles could lead to higher minimum health standards for working people—

I shall repeat it. What the noble Lord appeared to be saying was that these articles could lead to higher minimum health standards for working people, but they are to be resisted because the application of such standards could cost money. I must remember that argument.

May I correct the noble Baroness? What I think I was saying was that that would be acceptable to me but I wondered whether it
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would be acceptable to the Government, bearing in mind the financial restrictions and restraints that they have imposed over the past eight years.

As the noble Lord will be aware, we have accepted the amendments which have been proposed in the Single European Act and the consequences that flow from it. The Government have helped in a wholly practical way through the Single European Act to contribute to the raising of these various standards that are involved in health and safety at work. As I said, our standards are already among some of the highest in Europe, and the effect of this new provision is likely to be a gradual improvement in minimum standards elsewhere in the Community.

However, we put in a proviso which is included in the third paragraph. We were concerned to ensure that legislation in this area should not hold back the creation and development of small and medium-sized firms because of their important role in promoting innovation, growth and the creation of jobs. We therefore secured a provision to ensure that this would not happen.

As regards the second article, Article 118B, this represents an exhortation to greater dialogue between the social partners, that is to say, between management and unions. Of course, neither management nor labour can be compelled to enter into dialogue, still less to sign agreements based on it. The only obligation created by the article is placed on the Commission; namely, to endeavour to develop dialogue. This seems to me to be something which the noble Lord, Lord Stoddart, would like to see and therefore I hope very much that he will withdraw his amendments to enable these proposals to be included in the Single European Act and be carried out.

Lord Bruce of Donington

I shall not detain the noble Baroness for very long. I am just a little puzzled about one aspect of Article 118A, which is the proviso which she herself has already mentioned; namely, that such direction shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized undertakings.

To the uninitiated that would seem to imply that there will be two kinds of standards: one kind of standard for the very large undertaking and another kind of standard for the small and medium-sized undertaking. The noble Baroness must concede that the inference behind this is that if those standards of health and safety which are regarded as normal and which are fixed by law in regard to large undertakings (and which are presumably effective, otherwise they would not be legislated for) are too expensive—because this is what we are really talking about—when applied to small and medium-sized undertakings, then they shall somehow be relaxed. There does not otherwise seem to be any point in putting in the provision. Will the noble Baroness explain that?

It seems that there will be two standards. I presume that there will be a high standard for a large undertaking, but if the requirement imposes too great
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an administrative, financial or other constraint on a small or medium-sized business presumably the standards will be relaxed. That is the only reasonable inference. Will the noble Baroness explain that?

Under Article 118B the noble Baroness talks about the dialogue between management and labour. How do the Government envisage that taking place? What initiative will the Government take to see that that happens; or is the initiative, as always in these matters, to be left entirely to a Commission proposal? I ask the questions with a degree of scepticism following the unfavourable reaction in this place many years ago to the Bullock Report, which advocated a degree of worker participation which the CBI did not find entirely agreeable. Will the noble Baroness explain a little more what she means by dialogue? We are all human. Whether we are workers or management, we shall always talk to one another. Every time that we talk to someone there is presumably a dialogue.

I shall do my best to clarify the points raised by the noble Lord, Lord Bruce of Donington. He asked me what was meant by the second part of paragraph 2 of Article 118A:
which would hold back the creation and development of small and medium-sized undertakings".
As I understand the position, that paragraph will not affect minimum standards. I am sure that the noble Lord is aware that some small businesses which are starting may have minimum standards, whereas they may not have the standards of health and safety at work which might be expected in a larger well-established firm. We do not want anything which would prevent the creation of new jobs and the industrial base for which the noble Lord has been asking and which we all want to see.

Under Article 118A we should have improved health and safety at work standards. We have secured the provision that all the arrangements would not necessarily apply to small and medium-sized firms because of their important role in promoting new investment and growth.

The noble Lord asked me what we mean by dialogue. As I understand it, dialogue is already taking
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place. The TUC is involved and it is having talks with some managements. My right honourable friend the Paymaster General will be meeting the social partners shortly and will be discussing these matters.

I do not think that the noble Lord need feel that there is anything unusual or extraordinary about this matter. It is the kind of thing which I should have thought would have been welcomed by him and his colleagues. I hope therefore that with those explanations he will feel able to withdraw his amendments.

I shall not keep the Committee much longer. I am, however, still intrigued by Article 118B. Obviously, dialogue between the two sides of industry is to be welcomed. I certainly welcome it. Indeed, we on this side have been asking the Government to have better dialogue with the trade unions in this country. Unfortunately, they have not seen fit to take our advice. It is too late to go into the matter this evening. But it is quite intriguing. I do not know how this dialogue is to take place. I shall withdraw the amendment but, because I am so intrigued, I may want to probe the matter further at Report stage. I hope therefore that the noble Baroness will not mind if I put down another amendment on Report. With that, I beg leave to withdraw the amendment.